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When the Landlord Dies, the Lease Doesn’t
- by Roger McEowen
January 5, 2009
Oral farm leases present many problems, not the least of which is the question of what happens when either the landlord or the tenant dies during the term of the lease. This is another reason why it’s always best to get the terms of a farm lease in writing. But, that didn’t happen here and the landlord died during the lease term. A lawsuit among family members was filed to sort out the mess – with a very predictable outcome.
During her lifetime, Mom leased 65 acres of farm ground to one of her sons. It was an oral lease with the cash rent pegged to the amount of the real estate taxes on the farm. Mom died while the lease was in effect and the tenant’s brother was appointed the executor of Mom’s estate. Mom died in August, and the tenant continued farming the ground. The executor claimed that the lease ended when Mom died and that the amount of cash rent due under the lease should represent market value. The tenant disagreed, noting that he was never given any statutory notice of termination. Thus, he claimed that the lease continued for another year on the same terms and conditions – the rent amount was the amount of real estate taxes on the farm. The trial court agreed, and the executor appealed.
This was an easy one for the Court of Appeals. Iowa law specifies that the new owner (here the estate) simply steps into the shoes of the decedent and assumes the responsibility to follow Iowa law in terms of providing statutory notice of termination if the lease is to be terminated. If that doesn’t happen, and it didn’t in this case, the lease simply continues for another year on the same terms and conditions. The Iowa Supreme Court had decided a case involving this issue in 1980 which construed the applicable statute. So, it was simply a matter of following that 1980 precedent. The court also noted that the parties could have simply agreed to terminate the lease, but that also did not happen.
The bottom line is this – with an oral farm lease, if the landlord dies during the lease term, absent statutory notice of termination by the executor or the heirs (or mutual agreement of the parties), the lease continues on the same terms and conditions as the existing lease. A question not presented by the case is whether the same result would occur if the tenant dies during the lease term. Most courts that have considered that issue hold that the lease terminates with the tenant – the lease is a contract for the personal services of the tenant, so when the tenant dies, that kills the purpose of the lease and it ends.
It’s always best to put farm leases in writing and specify (among other things) what happens if one of the parties to the lease dies. Giltner v. Estate of Giltner, No. 8-537/07-2117, 2008 Iowa App. LEXIS 1280 (Iowa Ct. App. Dec. 31, 2008).